Stakeholders Theory and Theory of the Firm: a study on the hierarchy of objective- functions in Brazilian companies

João Maurício Gama Boaventura, Fernando Rodrigues Cardoso, Edison Simoni da Silva, Ralph Santos da Silva


Discussions opposing the Theory of the Firm to the Theory of Stakeholders are contemporaneous and polemical. One focal point of such debates refers to which objective-function companies should choose, whether that of the shareholders or that of the stakeholders, and whether it is possible to opt for both simultaneously.  Several empirical studies have attempted to test a possible correlation between both functions, and there has not been any consensus so far. The objective of the present research is to examine a gap in such discussions: is there (or not) a subordination of the stakeholders´ objective-function to that of the shareholders? The research is empirical and analytical and employs quantitative methods. Hypotheses were tested and data analyzed by using non-parametrical (chi-square test) and parametrical procedures (frequency correlation coefficient). Secondary data was collected from the Economática database and from the Brazilian Institute of Social and Economic Analyses (IBASE) website, relative to public companies that have published their Social Balance Statements following the IBASE model from 1999 to 2006, whose sample amounted to 65 companies. In order to assess the objective-function of shareholders a proxy was created based on the following three indices: ROE (return on equity), EnterpriseValue and Tobin´s Q. In order to assess the objective-function of stakeholders a proxy was created by employing the following IBASE social balance indices: internal ones (ISI), external ones (ISE), and environmental ones (IAM). The results have shown no evidence of subordination of stakeholders´ objective-function to that of the shareholders in analyzed companies, negating initial expectations and calling for deeper investigation of results. Its main conclusion, which states that the attempted subordination does not take place, is limited to the sample herein investigated and calls for ongoing research aiming at improvements which may lead to sample enlargement and, as a consequence, may make feasible the application of other statistical techniques which may yield a more thorough analysis of the studied phenomenon.

 Key words: Firm objective-function. Theory of firm. Theory of stakeholders. Subordination. Corporate governance.


Firm objective-function. Theory of firm. Theory of stakeholders. Subordination. Corporate governance.


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